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OPEC+ Headed for 2 Million Bpd Oil Output Cut in 2024

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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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IEA: OPEC+ Production Cuts To Send Oil Prices And Volatility Surging

  • Oil price volatility is expected to surge as a result of the recent OPEC+ supply cuts, the International Energy Agency said on Wednesday.
  • According to the Agency, the loss of OPEC+ supply from September onwards will drive a significant supply shortfall.
  • If Saudi Arabia and Russia then unwind cuts next year, the market would shift to a surplus but oil stocks would remain low leaving.

Oil prices are set for a surge in volatility amid an expected “significant supply shortfall” on the market in the fourth quarter of 2023, due to the Saudi-led cuts to OPEC+ oil supply, the International Energy Agency (IEA) said on Wednesday.   

So far this year, higher crude oil production from countries outside the OPEC+ alliance has managed to offset part of the OPEC+ cuts.  

“But from September onwards, the loss of OPEC+ production, led by Saudi Arabia, will drive a significant supply shortfall through the fourth quarter,” the IEA said today in its closely-watched Oil Market Report for September.

Last week, Saudi Arabia and Russia extended their production and export cuts of 1 million barrels per day (bpd) and 300,000 bpd, respectively, until the end of 2023, pushing Brent Crude prices to above $90 per barrel and the highest level in 10 months.

Oil prices traded in relative calm during August, with volatility at multi-year lows, the IEA said today. But a calm August was followed by the announcements of extensions of the supply cuts in early September, which sent prices and volatility higher.

Volatility could further increase through the end of this year, according to the agency.

If the two OPEC+ leaders unwind the cuts in early 2024, the market would shift to a surplus, the IEA said, but noted that oil stocks would still be at uncomfortably low levels. This increases “the risk of another surge in volatility that would be in the interest of neither producers nor consumers, given the fragile economic environment,” the Paris-based agency added.

“The Saudi-Russian alliance is proving a formidable challenge for oil markets,” it said, commenting on the move higher in oil prices and on its previous warnings about an already tightening oil market.

In August, observed global inventories plunged by a massive 76.3 million barrels, or by 2.46 million bpd, per the IEA estimates.  

By Tsvetana Paraskova for Oilprice.com

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  • Mamdouh Salameh on September 13 2023 said:
    Volatility is part and parcel of oil prices so we shouldn’t make a song and a dance of it. It could, however, signify supply shortages and imbalance in the market.

    Moreover, the IEA like many other analysts is under what I call the wrong impression that the Saudi cut is behind the rise in oil prices. The Saudi cut has nothing to do with the market and prices and everything to do with Saudi production difficulties.

    Neither OPEC is capable of raising its production soon nor are non-OPEC producers in a position to offset approaching shortages hence the volatility and the rising oil prices.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert

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